Newsletter Subscription

Highlights of an E-commerce Warehouse

E-commerce today is witnessing 50-100% growth year on year and the scale up is matched with increase in depth & width of the inventory held & sold to end customers. The warehouse or fulfilment centre needs to keep pace with such growth & complexity, which is unprecedented. And hence an e-commerce warehouse should essentially be a separate location from a Bulk warehouse.

SKU practices: As retailers look to economize at every level, SKU rationalization is getting more attention. A good SKU system can help improve merchandising, reduce out-of-stock situations, prevent unnecessary excess in stock and even help in forecasting. A simple serial number or code can streamline the pick and pack process. Since the vendor consistency to have the information on the product is not prevalent, an inbound process involving SKU identification tags / stickers is an adopted practice in ecommerce warehouse. To maintain the throughput efficiency, it is best suited to have barcodes (2D) or RFID tags on the inventory at unit level. In a bulk warehousing the information can be maintained & identified at case level and above.

Site: The site identified for an ecommerce warehouse has to be extremely clean and dust free to reduce the bottleneck of packing operation which is the last stage before outbound. Also the vertical height utility is lesser compared to a bulk warehouse and hence more lateral spread is required. The site needs to be in a location which is closer to the end user clusters. The bulk warehouse, traditionally are positioned at outskirts of the city. Given the logistics network, the location may not be a show stopper; however it is preferred to have a warehouse closer to the city.

Warehouse design: The warehouse in bulk goods scenario is a U shape warehouse which has the best utilization of dock resources as the receiving and shipping can share the dock doors, facilitates cross docking with the receiving and shipping docks adjacent to each other and may be co-mingled. It also supports excellent lift truck utilization because put away & retrieval trips are easily combined. The Warehouse in ecommerce scenario typically uses a modular flow design which is required for large scale individual processes operations. Such warehouses are more lateral and the warehouse is defined into modules dedicated to specific order flows or item popularity designations. Hence for such picking a separate forward area which is compact and configured for a picking task, improves the productivity by 10 to 20 times as against what it would be in a large reserve storage area.

For example the warehouse is dedicated to continuous flow transactions on A/B items, regular flows for B/C items and slow flows for C/D items. The locating of inventory in an ecommerce warehouse is dynamic within a zone.

Picking systems: For a Bulk warehouse the types of storage are Block Stock, Single deep selective pallet rack, double deep rack, drive in rack, drive thru rack, push back rack. Whereas for an ecommerce Environment the picking systems cater to broken case pick operations. This is facilitated with deck Shelving, bin shelving, modular storage drawers, carousels and mezzanine. The challenge in ecommerce warehouse, with high deck & bin shelving, is that the cube utilization is low compared to the bulk warehouse. As a result large floor space is required to store the products. Larger the area more travel time for the order pickers and hence an impact on the labour requirement. This may be balanced with the warehouse storage drawers & carousel which has high storage density; however the high product mix environment may not support a higher ratio of such systems. The other increase in cost is arrived by usage of mezzanine. This improves the storage density however is a sub optimal if compared to a selective pallet rack used in a bulk warehouse.

In a warehouse order picking is the highest operating cost unit (50%).

In a bulk warehouse ‘order picking’ are preferred for smaller sites and ‘wave picking’ for larger sites. In an ecommerce environment ‘wave picking’ is preferred method, which improves the efficiency of the order pick process couple with a downstream sorting activity.

(Anand Balakrishna is Director, SCM BU, Bertelsmann Marketing Services, Arvato India, The company is one of the WareHouse Management Provider for Ecommerce in India. Article Collated by Anand Balkrishna. Source: Primary Research and World Class warehousing and Material Handling book 13th August, 2012)

Interesting article Anand.
Quick questions:
1) Do you know which Indian players are managing their own inventory (as opposed to directly shipping from manufacturer)?
2) Which players does Arvato work with?

Anand Balkrishna

Hi Raj,

Flipkart, Yebhi, Zovi, Myntra are all managing own inventory. Even for back to back shipments they get the goods (most times) to their warehouse and ship to their customers.

Arvato today supports Vendors like Random House & Samsung and promotional support to Smsung & eBay. We also do reverse logistics for Mcafee.

Best
Anand
8586967044
p.s. regret the late response. I had not seen your comment till today.

http://www.yfsindia.com/ HarryLee

Fantastic reply!! Not only good article but also you have good knowledge regarding an ecommerce warehouse. I like the given informative article..

http://swizer.com Ramesh Nahata

e-commerce not the designed the way .. it is .. in India
true picture of e-commerce yet to come .. Amazon is leading it
Don’t feel bad but it is true when i share my thoughts with my category manager of leadings indian market places that you should cut down your operating cost and in reply he said it if this happen 1st thing they will loose job

Anand Balkrishna

Hi Ramesh,

I did not get it very well. If you can please re-write. I guess resource optimization will drive better bottom line and therby longivity for people’s role in an organization. Optimization can be achieved through role changes as well and not necessarily pink slips.